Director Bonuses And The Entire Fairness Test

Law360, New York (December 12, 2007, 12:00 AM EST) -- A recent Delaware case, Valeant Pharmaceuticals International v. Jerney, is an important reminder of the care which should be taken by directors in considering bonuses that include payments to themselves.

Delaware courts in particular are focusing heavily on issues of director independence and Jerney is the latest example of the bright light which the courts will bring to bear on directors’ self-interest.

Valeant, a biotech company, adopted a stock option bonus program (which included directors) at a time when the company’s fortunes were flying high and...